Question

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018,...

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:

Book
Values
Fair
Values
Current assets $ 20,250 $ 20,250
Building 110,250 65,150
Land 17,250 28,550
Trademark 0 34,600
Goodwill 37,500 ?
Liabilities (50,250 ) (50,250 )
Common stock (100,000 )
Retained earnings (35,000 )

1&2. Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: $132,000 and $86,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Homework Answers

Answer #1

SOLUTION

1. Exchange amounts $132,000

Account titles and Explanation Debit ($) Credit ($)
Current Assets 20,250
Building 65,150
Land 28,550
Trademark 34,600
Goodwill 33,700
  Liabilities 50,250
Cash 132,000

Goodwill under acquisition method

Amount ($)
Fair value of consideration transferred 132,000
Fair value of net identifiable assets 98,300
Excess of goodwill 33,700

2. Exchange amounts $86,000

Account titles and Explanation Debit ($) Credit ($)
Current Assets 20,250
Building 65,150
Land 28,550
Trademark 34,600
Gain on Bargain Purchase 12,300
  Liabilities 50,250
Cash 86,000

Bargain Purchase under acquisition method

Amount ($)
Fair value of consideration transferred 86,000
Fair value of net identifiable assets 98,300
Gain on bargain purchase 12,300
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